Over-Order Price Regulation

[Federal Register Volume 64, Number 84 (Monday, May 3, 1999)]
[Rules and Regulations]
[Pages 23532-23538]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10967]


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NORTHEAST DAIRY COMPACT COMMISSION

7 CFR Parts 1307 and 1308


Over-Order Price Regulation

AGENCY: Northeast Dairy Compact Commission.

ACTION: Final rule.

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SUMMARY: The Northeast Dairy Compact Commission amends the method for 
determining the amount of the administrative assessment charged to milk 
handlers. The amended rule gives the Commission discretion, in any 
given month, to waive the administrative assessment entirely, or to set 
the rate at the current rate of 3.2 cents, or less, per hundredweight 
of fluid milk. The Commission also promulgates a new rule that requires 
handlers to make payment to the Compact Commission by electronic funds 
transfer, if the total amount due is greater than $25,000.

EFFECTIVE DATES: The amendments to part 1308 are effective July 1, 
1999. The amendments to part 1307 are effective May 13, 1999.

ADDRESSES: Northeast Dairy Compact Commission, 34 Barre Street, Suite 
2, Montpelier, Vermont 05602.

FOR FURTHER INFORMATION CONTACT: Kenneth M. Becker, Executive Director, 
Northeast Dairy Compact Commission at the above address or by telephone 
at (802) 229-1941, or by facsimile at (802) 229-2028.

SUPPLEMENTARY INFORMATION:

I. Background

    The Northeast Dairy Compact Commission (``Commission'') was 
established under authority of the Northeast Interstate Dairy Compact 
(``Compact''). The Compact was enacted into law by each of the six 
participating New England states as follows: Connecticut--Pub. L. 93-
320; Maine--Pub. L. 89-437, as amended, Pub. L. 93-274; Massachusetts--
Pub. L. 93-370; New Hampshire--Pub. L. 93-336; Rhode Island--Pub. L. 
93-106; Vermont--Pub. L. 93-57. In accordance with Article I, Section 
10 of the United States Constitution, Congress consented to the Compact 
in Pub. L. 104-127 (FAIR Act), Section 147, codified at 7 U.S.C. 7256. 
Subsequently, the United States Secretary of Agriculture, pursuant to 7 
U.S.C. 7256(1), authorized implementation of the Compact.
    Pursuant to its rulemaking authority under Article V, Section 11 of 
the Compact, the Commission concluded an informal rulemaking process 
and voted to adopt a compact over-order price regulation on May 30, 
1997.1 The Commission subsequently amended and extended the 
compact over-order price regulation.2 In 1998, the 
Commission further amended specific provisions of the over-order price 
regulation.3 The current compact over-order price regulation 
is codified at 7 CFR Chapter XIII.
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    \1\ 62 FR 29626 (May 30, 1997).
    \2\ 62 FR 62810 (Nov. 25, 1997).
    \3\ 63 FR 10104 (Feb. 27, 1998); 63 FR 46385 (Sept. 1, 1998); 
and 63 FR 65517 (Nov. 27, 1998).
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    On November 27, 1998, the Commission issued a notice of proposed 
rulemaking proceedings on several subjects and issues, including 
whether the amount of, or method for determining, the administrative 
assessment should be amended.4 The Commission held a public 
hearing to receive testimony on December 11, 1998 in Boxborough, 
Massachusetts and comments were received until 5:00 p.m. on December 
31, 1998.
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    \4\ 63 FR 65563 (Nov. 27, 1998).
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    On January 13, 1999, the Commission held its deliberative meeting, 
pursuant to 7 CFR 1361.8, to consider all oral and written comments 
received at the public hearing and the additional comments received by 
the Commission's published comment deadline of December 31, 1998, and 
to deliberate and act on the proposed subjects and issues rulemaking 
regarding whether the

[[Page 23533]]

amount of, or method for determining, the administrative assessment 
should be amended.5
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    \5\ 64 FR 533 (Jan. 5, 1999).
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    Based on the oral testimony and written comments received in that 
proceeding, the Commission proposed to amend the method for determining 
the amount of the administrative assessment charged to milk handlers 
and also proposed to add a new rule that would require handlers to make 
payment to the Commission by electronic funds transfer, if the total 
amount due is greater than $25,000.6 The Commission held a 
public hearing in Concord, New Hampshire on March 3, 1999 and accepted 
written comments until March 17, 1999. The Commission held its 
deliberative meeting on April 7, 1999 to consider all the comments and 
testimony received regarding the administrative assessment regulation, 
including all testimony and comments previously received in the 
December 1998 proceeding.7 Based on the December 1998 and 
March 1999 rulemaking records, the Commission amends the administrative 
assessment regulation, 7 CFR Part 1308, to give the Commission 
discretion, in any given month, to waive the administrative assessment 
entirely, or to set the rate at the current flat rate of 3.2 cents, or 
less, per hundredweight of fluid milk.
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    \6\ 64 FR 4353 (Jan. 28, 1999).
    \7\ 64 FR 4353, 4355 (Jan. 28, 1999), 64 FR 14943 (March 29, 
1999) and Transcript of March 3, 1999 public hearing at 9.
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    In addition to the amendments to the administrative assessment 
regulation, the Commission also promulgates a new rule at 7 CFR Part 
1307, to require milk handlers to make payment to the Compact 
Commission by electronic funds transfer, if the total amount due is 
greater than $25,000.
    Article V, Section 11 of the compact delineates the administrative 
procedure the Commission must follow in deciding whether to adopt or 
amend a price regulation. That section requires the Commission to 
conduct an informal rulemaking proceeding governed by section four of 
the federal Administrative Procedures Act (``APA''), as amended, 5 
U.S.C. 553, to provide interested persons with an opportunity to 
present data and views. The informal rulemaking proceeding must include 
public notice and opportunity to participate in a public hearing and to 
present written comment. In addition, section 553(d) of the APA 
provides that ``publication or service of a substantive rule shall be 
made not less than 30 days before its effective date,'' subject to 
several enumerated exceptions, including situations where the agency 
finds ``good cause'' for dispensing with this requirement. See, 5 
U.S.C. 553(d)(3).
    The Commission finds that there is good cause for dispensing with 
the 30-day waiting period of Sec. 553(d), with regard to only the new 
rule at section 1307 requiring payment by electronic funds transfer, 
because compliance is impracticable, unnecessary, and contrary to the 
public interest. The Commission emphasizes that the new rule requiring 
payment by electronic funds transfer was adopted by the Commission 
after a comprehensive administrative process, including public hearing 
and notice-and-comment rulemaking.8 The Commission received 
no public comments regarding the electronic funds transfer rule. The 
Commission has provided actual notice of this new rule to all effected 
milk handlers no later than April 13, 1999 and the first day of 
required compliance with this new rule will be May 18, 1999.
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    \8\ 64 FR 4353 (Jan. 28, 1999).
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II. Summary and Analysis of Issues and Comments

Administrative Assessment

    The Commission received oral and written testimony and comments 
from the Commission's Regulations Administrator, Carmen Ross, and eight 
commenters in the December 1998 subjects and issues rulemaking 
proceeding, regarding whether the amount of, or method for determining, 
the administrative assessment should be amended.9 In the 
subsequent March 1999 proposed rule proceedings, the Commission 
received oral testimony from Mr. Ross and written comments from two 
commenters.10 The Commission confirms its published analysis 
of the testimony and written comments received in the December 1998 
proceeding.11 Therefore, the Commission herein supplements 
that analysis by reviewing the testimony and comments received in the 
March 1999 proceedings.
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    \9\ Carmen L. Ross, Transcript (``Tr.'') at 4; Charles Arbing, 
Tr. at 30; Diane Bothfeld Tr. at 54 and Written Comment (``WC'') at 
32; Leon J. Berthiaume, WC 13 ; Robert D. Wellington, WC 16; Edward 
W. Gallagher, WC 18; Sally J. Beach, WC 21; Michael L. Altman, WC 
25; and Leon Graves, WC 34;
    \10\ Ross, Record (``R.'') at 9; Michael L. Altman, on behalf of 
Suiza GTL, LLC, H.P. Hood, Inc. and the Stop & Shop supermarket 
Companies, Inc., R. at 38-42; Diane Bothfeld, R. 43.
    \11\ 64 FR 4353 (Jan. 28, 1999).
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    Mr. Ross opened his testimony on March 3, 1999 by repeating the 
main points of his testimony of December 11, 1998. Mr. Ross reiterated 
that the Compact authorizes the Commission to impose an assessment on 
milk handlers to cover the costs of the administration and enforcement 
of the over-order price regulation. He explained the principle of milk 
market regulation that the milk handlers, not the dairy farmers, are 
assessed to pay the costs of the administration and enforcement of the 
milk market regulation and that this assessment is a cost of doing 
business in the milk market.12
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    \12\ Ross, R. at 15.
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    Mr. Ross also explained that the Compact requires the Commission to 
establish a reserve for the ongoing operating expenses.13 
The current administrative assessment is a flat rate of 3.2 cents per 
hundredweight and results in a variance in income of up to 13% per 
month.14 Mr. Ross stated that the Commission regulation is, 
in all material respects, the same as corresponding provisions of the 
Federal Order #1 regulations.15
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    \13\ Ross, R. at 10; See also, Compact Article IV, Section 10(9) 
and Article VII, Section 18(a).
    \14\ Ross, R. at 14-15.
    \15\ Ross, R. at 11-12.
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    Mr. Ross explained that under the Federal Market Order #1 
regulation, ``the federal market order [Administrator] can, when 
conditions warrant it, reduce or even waive the administrative 
assessment.'' 16 Under Federal Market Administrator 
Instruction 207, the United States Department of Agriculture 
Dairy Division (USDA) recommends that budgeted operating reserves be 
maintained within a range of 80% to 120% of the designated reserve 
level.17
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    \16\ Ross, R. at 16.
    \17\ Market Administrator Instruction #207, December 1998 
rulemaking record, WC at 3-11, and referenced in March 1999 
rulemaking record, R. at 17.
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    At the subjects and issues hearing in December 1998, a milk 
processor testified in support of an amendment to the Commission's 
administrative assessment regulation that would recognize the 
Commission's budget process, impose a limitation on the Commission's 
reserves and provide for an adjustment or waiver of the administrative 
assessment based on the budget and the reserves.18 As is 
explained in more detail below, the Commission adopts this commenter's 
recommendations in all material respects.
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    \18\ Arbing, Tr. at 53-53 (December 1998 rulemaking record).
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    Of the two commenters who participated in the March 1999 public 
hearing and comment part of this rulemaking proceeding, one commenter 
supported the proposed rule to allow

[[Page 23534]]

the Commission to adjust the administrative assessment rate, upward or 
downward, as needed.19
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    \19\ Bothfeld, R. at 43.
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    The other commenter,20 on behalf of the three major 
fluid milk handlers in New England, generally supported the 
Commission's proposal to permit it the discretion to adjust or waive 
the administrative assessment rate and further reiterated his two main 
objections (as submitted in the December 1998 subjects and issues 
proceeding) 21 to the Commission's administrative assessment 
regulation: (1) That the Commission should not use the funds generated 
by the administrative assessment for any purpose other than the actual 
costs of computing, announcing, collecting or distributing the over-
order obligation; and (2) that the administrative assessment is an 
unfair burden on the milk handlers. The Commission has carefully 
considered these arguments and respectfully disagrees.
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    \20\ Altman, R. at 38-42.
    \21\ Altman, December 1998 rulemaking record, WC at 26-30; See 
also, Commission analysis of these comments at 64 FR 4354-4355 (Jan. 
28, 1999).
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    In making his first main objection, this commenter relies on a 
narrow, and inaccurate, reading of the language of the Compact to argue 
the Commission must only use the assessment to administer the over-
order obligation provisions of the Compact Over-order Price Regulation. 
The commenter asserts that the Compact restricts the administrative 
assessment provision of Article VII, Section 18(a) to the 
administration of the over-order obligation only.22 However, 
the full sentence, of which the commenter quotes only a portion, 
plainly and clearly references the over-order price regulation. The 
section of the Compact in question provides, in relevant part, as 
follows: ``In addition, if regulations establishing an over-order price 
or a compact marketing order are adopted, they may include an 
assessment for the specific purpose of their administration. These 
regulations shall provide for establishment of a reserve for the 
commission's ongoing operating expenses.'' The Commission concludes 
that the language of the Compact itself is clear and for this reason 
respectfully rejects the commenter's suggested interpretation.
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    \22\ Altman, R. at 41.
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    In addition to the plain language of the Compact, accepted 
principles of statutory interpretation also compel rejection of this 
commenter's suggested reading of Section 18(a), because to do so would 
render other provisions of the Compact meaningless. The commenter's 
restrictive interpretation of the language of the Compact would, for 
example, render meaningless the provisions of Article IV, Section 10. 
That section provides eleven separate paragraphs of provisions that the 
Commission is specifically authorized to include in a compact over-
order price.23 Those provisions are not restricted to the 
physical activities of computing, announcing, collecting or 
distributing the over-order obligation, as the commenter's narrow 
interpretation of Section 18(a) would require. ``[L]egislative 
enactments should not be construed to render their provisions mere 
surplusage.'' Dunn v. Commodity Futures Trading Comm'n, 117 S.Ct. 913, 
917 (1997). In light of the plain language of the Compact, reinforced 
by application of accepted principles of statutory construction, the 
Commission respectfully rejects this commenter's interpretation of the 
Compact.
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    \23\ In authorizing the Compact, Congress specifically 
prohibited the Commission from including a provision in the over-
order price regulation for compensatory payments, as included in 
Section 10(6). 7 U.S.C. 7256(7).
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    The Commission also declines to accept the narrow interpretation of 
Section 18(a) of the Compact advanced by the commenter because his 
interpretation would lead to such illogical results as to leave the 
Commission without the funds to carry out its obligations and 
responsibilities under the Compact and the Over-order Price Regulation 
as a whole.24 For example, the commenter's suggestion that 
the administrative assessment be used only for the direct costs 
associated with the actual computing, announcing, collecting or 
distributing the over-order obligation,25 would leave the 
Commission without funds for amending the over-order price regulation, 
as authorized by Compact Article V, for providing handler exemption 
petition proceedings, as required by Compact Article VI, Section 16, or 
for conducting and administering the activities authorized, or required 
by, Articles I, II, IV, or VII of the Compact.26 
Furthermore, as explained below, the Compact is designed to have the 
administration and enforcement activities of the Commission supported 
by assessments on handlers. Article VII, Section 18(b) specifically 
prohibits the Commission from pledging the credit of any participating 
state, or the United States. Although the Commission may, at times, 
obtain funding from other sources, such funds cannot be obtained with 
any predictability, and Section 18 does not compel any state to 
contribute funds to support the activities of the Commission. However, 
if the receipt of such unanticipated funds are sufficient, the 
amendments to the administrative assessment rule will allow the 
Commission to reduce or waive the assessment on handlers.
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    \24\ See, e.g. Green v. Bock Laundry Machine Co., 490 U.S. 504, 
509-10 (1989); In re Pacific-Atlantic Trading Co., 64 F.3d 1292, 
1303 (9th Cir. 1995) (``Legislative enactments should never be 
construed as establishing statutory schemes that are illogical, 
unjust or capricious.'') (internal citations omitted). In addition, 
for the reasons discussed more fully below, the Compact producer-
settlement funds are not used for administrative purposes and 
principles of milk market regulation assess the costs of the 
administration of milk price regulation to handlers, as a cost of 
doing business in the milk marketplace, not to farmers or to 
cooperatives, as suggested by the commenter.
    \25\ Altman, R. at 42.
    \26\ See also, 64 FR 4354-55 (Jan. 28, 1999).
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    Therefore, the Commission reaffirms its interpretation of its 
authority under the Compact that the administrative assessment may be 
used to fund all administration and enforcement activities to implement 
the entire over-order price regulation and to effectuate its 
obligations and responsibilities under the Compact.27
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    \27\ 64 FR 4354-4355 (Jan. 28, 1999); See also, Ross, R. at 12-
14.
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    The core of this commenter's second main argument is that the 
administrative assessment places an unfair burden on milk handlers. The 
commenter suggests that the Commission should fund its statutory and 
regulatory activities through voluntary contributions of states, 
cooperatives and handlers. However, that interpretation is contrary to 
the underlying principles of milk market regulation, which establishes 
the handler's cost of raw milk, including the amount that must be paid 
to producers and the cost of administration of the federal regulation, 
the compact regulation and even the cost of fluid milk 
promotion.28 The interpretation is also contrary to the 
design of the Compact, which specifies that the Commission should fund 
its administration and enforcement costs through an administrative 
assessment on milk handlers. Compact Article IV, Section 10(9) and 
Article VII, Section 18(a). Carmen Ross explained the ``regulatory 
techniques historically associated with milk marketing,'' 29 
as they specifically relate to the administrative assessment component 
of the milk regulation principle, as follows:

    \28\ Ross, R. at 15-16, 27-29.
    \29\ Compact Article II, Section 3(b).
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    As I just stated, the Compact administration assessment 
regulation is consistent with the Federal Market Order #1 regulation 
in its applicability to fluid milk

[[Page 23535]]

handlers. The principle is that the milk handlers, not the dairy 
farmer, pay for the administration and enforcement of the milk price 
regulation. This is a cost of doing business in the milk market. The 
same as all other costs associated with the assembly and receipts of 
milk at the plant.
    The cost of milk includes the announced Federal Order Class I 
price, Federal Order Administrative Assessment, Federal Order 
Processor Assessment, Federal Order differential, Federal Order 
plant zone, hauling, handling, farmer or cooperative premiums, plant 
loss and the Compact over-order obligation and the Compact 
administrative assessment.
    The total of all the above is the handler's cost of raw milk. To 
this cost, a handler will add the processing cost, container cost, 
delivery cost and margins to arrive at the handler's sale price. The 
Compact assessment is only one of the many components that is 
included to arrive at the sale price of milk. The Compact 
administrative assessment, like all other costs, are ultimately paid 
by the market, the consumer, not the handler.30

    \30\ Ross, R. at 15-16.
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    The Federal Market Administrator announces the raw milk price on 
the fifth day of the month preceding the month the announced price will 
be applied. This advance price announcement allows the milk handlers to 
set their prices accordingly and to recover those costs from the milk 
marketplace. If, after receiving advance notice of the price, a handler 
does not choose to include a particular component in his selling price, 
that is the handler's decision and not within the control of either the 
Federal Market Order Administrator or the Compact Commission. 
Therefore, the administrative assessment, as well as all other costs 
associated with milk market regulation, is a cost of doing business in 
the milk market.31 The regulation does not require the 
assessment to come from the handler's profit line and the advance price 
announcement allows the handlers the opportunity to pass the costs on 
in setting their sale price for the milk. Therefore, the consumer, and 
not the milk handler, is paying the incremental cost of administering 
the Compact Over-order Price Regulation.32 Accordingly, the 
Commission respectfully disagrees with the commenter's assertion that 
the Compact administrative assessment portion of the regulated milk 
price places an unfair burden on milk handlers.
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    \31\ Ross, R. at 15-16 and 28-29.
    \32\ Ross, R. at 16 and 28-29.
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    Contrary to this commenter's 33 broad complaints, the 
Commission seeks to, and indeed does, incorporate the interests of all 
the affected constituencies in its regulatory decisions. The Commission 
is itself made up of state officials, consumers, producers and 
processors. The delegation members to the Commission are appointed, as 
provided in the Compact, as passed by all six participating states and 
approved by Congress. Compact, Article III, Section 4. Two of the 
states specifically require processors to be a part of the state 
delegation. Vermont, 6 V.S.A. 1823 (``A fourth voting member shall be a 
milk handler'') and New Hampshire, RSA 184-A:2 (``One owner or officer 
of a fluid milk processing or distribution plant.'') Two other states 
have appointed members to the delegation who are associated with fluid 
milk processors. Therefore, the interests of milk processors are 
clearly, and actively, represented and protected through membership in 
the state delegations to the Compact Commission.
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    \33\ Altman, R. at 39-42.
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    In addition, the Commission always provides the opportunity for 
regulated handlers to participate in each of its rulemaking proceedings 
through attending and testifying at the public hearings and/or 
submitting written comments and testimony.34
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    \34\ As always, the Commission encourages and welcomes full 
participation by all those affected by the Commission's regulations. 
The Commission notes, however, that although this commenter has 
submitted written arguments, he has not availed himself of the 
opportunity to attend either of the public hearings held in December 
1998 or March 1999 by the full Commission regarding the 
administrative assessment regulation. The opportunity for 
interactive discourse with the full Commission, offered in the 
public hearing forum, is very beneficial to and instructive for the 
Commission and such participation significantly advances the 
rulemaking proceeding. Indeed, as discussed above, the final rule 
adopted by the Commission includes major elements proposed in the 
testimony of one commenter, a processor, in the December 1998 
hearing. Arbing, Tr. at 53-54 (December 1998 rulemaking record).
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    After careful review of both the December 1998 and March 1999 
rulemaking records relating to the administrative assessment 
regulation, the Commission concludes that the model used by the USDA is 
an appropriate standard for the Commission to use in the establishment 
of its administrative assessment rate. Therefore, the Commission amends 
the administrative assessment provision of the over-order price 
regulation to give the Commission discretion, in any given month, to 
waive the administrative assessment entirely, or to set the rate at the 
current flat rate of 3.2 cents, or less, per hundredweight of fluid 
milk. In establishing this rate-setting flexibility, the Commission's 
goal is to maintain a reserve account in the range of 80% to 120% of 
four-months operating expenses, as determined to be necessary in the 
budget approved by the Commission. This range is not binding on the 
Commission and the Commission at all times retains the discretion 
whether to waive or adjust the rate of the administrative assessment.
    The Commission also sought testimony and comment on whether the 
administrative assessment regulation should be amended to permit the 
Commission to adjust the rate upward, from the current rate of 3.2 
cents, in exceptional circumstances. The Commission's Regulations 
Administrator, Carmen Ross, testified that there may be times that the 
Commission needs to increase the assessment rate to ``cover operating 
expenses because of unknown extraordinary or exceptional 
circumstances.'' 35 One commenter supported the proposal to 
allow the Commission the flexibility to increase the administrative 
assessment rate ``to maintain the solvency of the Compact so it can 
maintain its operations and fulfill the responsibilities as established 
under the law.'' 36
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    \35\ Ross, R. at 18-19.
    \36\ Bothfeld, R. at 43.
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    The Commission carefully considered this option and concluded that 
it is not necessary at this time to amend the administrative assessment 
rule to permit an increase over the current rate of 3.2 cents. The 
Commission income from the administrative assessment is sufficient to 
cover the anticipated and budgeted expenses. Although, as explained 
above, the Commission disagrees with some processors' assertions that 
the administrative assessment constitutes an unfair burden on milk 
handlers, the Commission is nevertheless sensitive to the concerns of 
these processors. Accordingly, the Commission chooses not to add a rate 
increase provision to the regulation in cognizance of some processors' 
perception of the Commission's administrative assessment.

Method of Payment

    The Commission also promulgates a new regulation which requires 
milk handlers to make payment of the over-order obligation and 
administrative assessment to the Commission by electronic transfer of 
funds if the aggregate total due for the month is greater than $25,000. 
The Commission adds this rule in order to best ensure the efficient and 
timely transfer of funds into the producer-settlement fund and the 
corresponding timely distribution of funds from the producer-settlement

[[Page 23536]]

fund.37 Based on the experience of the Commission in 
administering the producer-settlement fund, most handlers already use 
electronic transfer of funds. The Commission also uses electronic 
transfer of funds for distribution to handlers of monies from the 
producer-settlement fund.38 The Commission received no 
comments on this proposed rule.
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    \37\ Ross, R. at 19-26.
    \38\ Ross, R. at 24-25.
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III. Summary and Explanation of Findings

    Article V, Section 12 of the Compact directs the Commission to make 
four findings of fact before an amendment of the Over-order Price 
Regulation can become effective. Each required finding is discussed 
below.

a. Whether the Public Interest Will Be Served by the Amendments to the 
Over-Order Price Regulation

    The first finding considers whether the amendments to the Compact 
Over-order Price Regulation serves the public interest. The Commission 
determines that the public interest is served by allowing the 
Commission discretion to waive entirely or set the administrative 
assessment at the current rate of 3.2 cents, or less, per hundredweight 
of fluid milk, in any given month, to support the Commission's 
administration and enforcement of the Over-order Price Regulation, as 
authorized by Article VII, Section 18(a) of the Compact.
    The Commission also determines that the public interest is served 
by requiring all regulated milk handlers to make payment to the 
Commission by electronic funds transfer, if the total amount due is 
greater than $25,000. This rule ensures the Commission's timely 
processing of the monthly pool, when payments are received and 
distributed within two business days.

b. The Impact on the Price Level Needed To Assure a Sufficient Price to 
Producers and an Adequate Local Supply of Milk

    The amendments to the Compact Over-order Price Regulation adopted 
in this rulemaking proceeding are related to the administration of the 
Over-order Price Regulation and do not affect the local supply of milk 
or price received by producers, other than through ensuring timely 
receipt of payment by adoption of the electronic funds transfer rule.

c. Whether the Major Provisions of the Order, Other Than Those Fixing 
Minimum Milk Prices, Are in the Public Interest and Are Reasonable 
Designed To Achieve the Purposes of the Order

    The Commission concludes that, for the same reasons identified in 
the first finding, the amendments adopted in this rulemaking proceeding 
are in the public interest. The Commission further concludes that the 
Over-order Price Regulation, as hereby amended, remains in the public 
interest in the manner contemplated by this finding.

d. Whether the Terms of the Proposed Amendments Are Approved by 
Producers

    The fourth finding, requiring the determination of whether the 
amendment has been approved by producer referendum pursuant to Article 
V, Section 13 of the Compact is invoked in this instance given that the 
amendment will affect the level of the price regulation on the producer 
side. In this final rule, as in the previous final rules, the 
Commission makes this finding premised upon certification of the 
results of the producer referendum. The procedure for the producer 
referendum and certification of the results is set forth in 7 CFR Part 
1371.
    Pursuant to 7 CFR 1371.3 and the referendum procedure certified by 
the Commission, a referendum was held during the period of April 16 
through April 26, 1999. All producers who were producing milk pooled in 
Federal Order #1 or for consumption in New England, during December 
1998, the representative period determined by the Commission, were 
deemed eligible to vote. Ballots were mailed to these producers on or 
before April 16, 1999 by the Federal Order #1 Market Administrator. The 
ballots included an official summary of the Commission's action. 
Producers were notified that, to be counted, their ballots had to be 
returned to the Commission offices by 5:00 p.m. on April 26, 1999. The 
ballots were opened and counted in the Commission offices on April 27, 
1999 under the direction and supervision of Commission Chair Mae S. 
Schmidle, designated ``Referendum Agent.''
    Twelve Cooperative Associations were notified of the procedures 
necessary to block vote by letter dated April 9, 1999. Cooperatives 
were required to provide prior written notice of their intention to 
block vote to all members on a form provided by the Commission, and to 
certify to the Commission that (1) timely notice was provided, and (2) 
that they were qualified under the Capper-Volstead Act. Cooperative 
Associations were further notified that the Cooperative Association 
block vote had to be received in the Commission office by 5:00 p.m. on 
April 26, 1999. Certified and notarized notification to its members of 
the Cooperative's intent to block vote or not to block vote had to be 
mailed by April 20, 1999 with notice mailed to the Commission offices 
no later than April 22, 1999.

Notice

    On April 27, 1999, the duly authorized referendum agent verified 
all ballots according to procedures and criteria established by the 
Commission. The ballots cast on the administrative assessment amendment 
and the electronic funds transfer amendment were separately reviewed 
and counted. A total of 3987 ballots were mailed to eligible producers. 
All producer ballots and cooperative block vote ballots received by the 
Commission were opened and counted. Producer ballots and cooperative 
block vote ballots were verified or disqualified based on criteria 
established by the Commission, including timeliness, completeness, 
appearance of authenticity, appropriate certifications by cooperative 
associations and other steps taken to avoid duplication of ballots. 
Ballots determined by the referendum agent to be invalid were marked 
``disqualified'' with a notation as to the reason.
    Block votes cast by Cooperative Associations were then counted. 
Producer votes against their cooperative associations block vote were 
then counted for each cooperative association. These votes were 
deducted from the cooperative association's total and were counted 
appropriately. Ballots returned by cooperative members who cast votes 
in agreement with their cooperative block vote were disqualified as 
duplicative of the cooperative block vote.
    Votes of independent producers not members of any cooperative 
association were then counted.
    The referendum agent then certified the following for the ballot on 
the administrative assessment amendment:
    A total of 3,987 ballots were mailed to eligible producers.
    A total of 3,010 ballots were returned to the Commission.
    A total of 34 ballots were disqualified--late, incomplete or 
duplicate.
    A total of 2,976 ballots were verified.
    A total of 2,960 verified ballots were cast in favor of the 
administrative assessment amendment.

[[Page 23537]]

    A total of 16 verified ballots were cast in opposition to the 
administrative assessment amendment.
    Accordingly, notice is hereby provided that of the 2,976 verified 
ballots cast, 2,960, 99.5 %, or, a minimum of two-thirds were in the 
affirmative.
    The referendum agent then certified the following for the ballot on 
the electronic funds transfer amendment:
    A total of 3,987 ballots were mailed to eligible producers.
    A total of 3,010 ballots were returned to the Commission.
    A total of 35 ballots were disqualified--late, incomplete or 
duplicate.
    A total of 2,975 ballots were verified.
    A total of 2,967 verified ballots were cast in favor of the 
electronic funds transfer amendment.
    A total of 8 verified ballots were cast in opposition to the 
electronic funds transfer amendment.
    Accordingly, notice is hereby provided that of the 2,975 verified 
ballots cast, 2,967, 99.7%, or, a minimum of two-thirds were in the 
affirmative.
    Therefore, the Commission concludes that the terms of the 
administrative assessment and electronic funds transfer amendments are 
approved by producers.

IV. Good Cause for Effective Date Within 30 Day Notice Period

    The Administrative Procedure Act, 5 U.S.C. 553(d), requires that 
the Compact Commission publish a substantive rule not less than 30 days 
before its effective date, except that this time period is not required 
for a substantive rule as otherwise provided by the agency for good 
cause found and published with the rule. The Commission concludes that, 
to the extent that the electronic funds transfer rule is a substantive 
rule, the Commission nevertheless finds that there is good cause for 
non-compliance with the 30-day advance publication provision of 553(d) 
and publishes this final rule on May 3, 1999, with an effective date of 
May 13, 1999.
    In promulgating this new regulation, the Commission specifically 
finds good cause to set an effective date within thirty days of 
publication in the Federal Register. As described by Carmen Ross, the 
Commission's Regulations Administrator, the time line for the 
Commission to receive funds from milk handlers on the 18th of the month 
and make payments from the producer-settlement fund on the 20th of the 
month places a tremendous burden on the Commission to clear the pool in 
two business days.39 If a handler makes payment by check, 
the funds, although received by the Commission on the 18th of the 
month, are not always available to be paid out on the 20th of the 
month.40 The Commission disburses funds through electronic 
transfer and must have the funds available to make the payments out of 
the producer settlement fund.41
---------------------------------------------------------------------------

    \39\ Ross, R. at 20.
    \40\ Ross, R. at 21.
    \41\ Ross, R. at 24-25.
---------------------------------------------------------------------------

    If the payments received from handlers by check exceed the 
Commission's reserve amount in the producer-settlement account, the 
Commission can uniformly reduce payments back to handlers or establish 
a line of credit with the bank.42 As Mr. Ross stated in his 
testimony: ``Reducing payments to the handlers would create havoc since 
all handlers would have already included the anticipated amount due 
from the Commission on their payroll and handlers would face a shortage 
of funds.'' 43 Alternatively, either the producer-settlement 
fund or the Commission administrative fund would have to incur the cost 
of establishing a line of credit.44 Based on the price 
announcement on March 5, 1999 for April milk, the Commission will be 
faced with the possibility of confronting this problem during the pool 
to be run on May 18 through 20. In order to ensure timely receipt of 
available funds to the producer-settlement fund, and the timely 
distribution from that fund, the Commission finds good cause, to the 
extent necessary, to set an effective date of this new regulation of 
May 13, 1999.
---------------------------------------------------------------------------

    \42\ Ross, R. at 25.
    \43\ Ross, R. at 25.
    \44\ Ross, R. at 26.
---------------------------------------------------------------------------

    The Commission determines that, in promulgating the electronic 
funds transfer rule, compliance with the 30-day waiting period, in this 
instance, is excused for three separate reasons: it is (1) 
impracticable, (2) unnecessary, and (3) contrary to the public 
interest. See, e.g., Service Employees Intern Union, Local 102 v. 
County of San Diego, 60 F.3rd 1346 (9th Cir. 1994) (good cause 
exemption to Sec. 553(d) includes situations where compliance is 
impracticable, unnecessary, or contrary to the public interest); 
Buschmann v. Schweiker, 676 F. 2d 352 (9th Cir. 1982) (same).
    1. It would be impracticable to provide the thirty-day interval 
because, based on the April price of milk announced by the Federal 
Market Administrator on March 5, 1999, the Commission will run its 
largest pool ever on May 18 through 20, and the anticipated over-order 
obligation of several handlers will exceed the Commission's reserve 
fund. The Commission must have access to the handlers' payments by May 
20 in order to distribute the funds for payment to producers. Although 
the Commission began this proceeding by published notice on January 28, 
1999, and voted to adopt the rule on April 7, 1999, Article V, Section 
21 requires the Commission to conduct a producer referendum before 
issuing the final rule. Based on the Commission's producer referendum 
procedure, the earliest publication date is May 3, 1999. Therefore, the 
thirty-day notice interval is impracticable and compliance with that 
rule would impair the Commission's ability to clear the pool on May 20, 
1999.
    2. The full thirty-day post-publication notice period is 
unnecessary because the Commission provided actual notice, by certified 
mail, return receipt, to all affected handlers no later than April 13, 
1999.
    3. In this instance, the full thirty-day notice requirement is 
contrary to the public interest. Based on the anticipated volume of 
milk in the pool to be run on May 18 through 20, several handlers will 
owe sums in excess of the reserve balance in the producer-settlement 
fund. If just one of those handlers makes payment by check that does 
not clear by May 20, the Commission will be forced to uniformly reduce 
payments out of the producer-settlement fund to all handlers, thereby 
interfering with those handlers already prepared payments to producers. 
The public interest requires that producers receive their payments in a 
timely manner. Most of the handlers already make payment by electronic 
funds transfer, and the Commission disburses funds by electronic 
transfer. This rule will only affect a few handlers, but failure to 
implement this rule prior to May 18, 1999 could result in an otherwise 
unnecessary reduction in the producer payments to all producers 
supplying the New England milk market. The Commission emphasizes that 
it received no comments opposing promulgation of this requirement. 
Therefore, the Commission concludes that the thirty-day notice period 
is not in the public interest.
    Finally, the purpose of the procedural requirement that a rule be 
published thirty days prior to its effective date is to permit those 
affected by the amendment a reasonable amount of time to prepare to 
take whatever action is prompted by the final rule. As noted above, all 
affected handlers have received actual notice of the action required by 
the rule in excess of thirty

[[Page 23538]]

days of the date the action is first required, May 18, 1999.
    Accordingly, for all the reasons described above, the Commission 
concludes that the full thirty-day post-publication notice period is 
not required.

V. Required Findings of Fact

    Pursuant to Compact Article V, Section 12, the Compact Commission 
hereby finds:
    1. That the public interest continues to be served by establishment 
of minimum milk prices to dairy farmers under Article IV, as amended 
to: (1) permit the Commission discretion, in any given month, to waive 
entirely or to set the rate of the administrative assessment at the 
current rate of 3.2 cents, or less, per hundredweight of fluid milk; 
and (2) require handlers make payment to the Commission by electronic 
funds transfer, if the total amount due is greater than $25,000.
    2. That the previously established level price of $16.94 (Zone 1) 
to dairy farmers under Article IV, is unaffected by these amendments, 
and will continue to assure that producers supplying the New England 
market receive a price sufficient to cover their costs of production 
and will elicit an adequate supply of milk for the inhabitants of the 
regulated area and for manufacturing purposes.
    3. That the major provisions of the order, other than those fixing 
minimum milk prices, are and continue to be in the public interest and 
are reasonably designed to achieve the purposes of the order.
    4. That the terms of the proposed amendments are approved by 
producers pursuant to a producer referendum required by Article V, 
Section 13.

List of Subjects in 7 CFR Parts 1307 and 1308

    Milk.

Codification in Code of Federal Regulations

    For reasons set forth in the preamble, the Northeast Dairy Compact 
Commission amends 7 CFR parts 1307 and 1308 as follows:

PART 1307--PAYMENTS FOR MILK

    1. The authority citation for part 1307 continues to read as 
follows:

    Authority: 7 U.S.C. 7256.


Sec. 1307.4  [Redesignated]

    2. Section 1307.4 is redesignated as Sec. 1307.5.
    3. A new Sec. 1307.4 is added to read as follows:


Sec. 1307.4  Method of payment.

    If the combined total of the handler's producer-settlement fund 
debit for the month as determined under Sec. 1307.2(a) and the 
handler's obligation for the month as determined under Sec. 1308.1 of 
this chapter is greater than $25,000, then the handler must make 
payment to the compact commission by electronic transfer of funds on or 
before the 18th day after the end of the month.

PART 1308--ADMINISTRATIVE ASSESSMENT

    1. The authority citation for part 1308 continues to read as 
follows:

    Authority: 7 U.S.C. 7256.

    2. Section 1308.1 is amended by revising the introductory text to 
read as follows:


Sec. 1308.1  Assessment for pricing regulations administration.

    On or before the 18th day after the end of the month, each handler 
shall pay to the compact commission his pro rata share of the expense 
of administration of this pricing regulation. The payment shall be at 
the rate of 3.2 cents per hundredweight. The compact commission may 
waive, or set the rate at an amount less than 3.2 cents, pursuant to 
Sec. 1308.2. The payment shall apply to:
* * * * *
    3. A new Sec. 1308.2 is added to read as follows:


Sec. 1308.2  Method to waive or change the administrative assessment.

    The compact commission may waive or change the assessment for 
pricing regulation administration to maintain the operating reserve in 
the range of 80% to 120% of four months operating expenses, as 
determined in the budget approved by the compact commission. The 
compact commission will announce, pursuant to Sec. 1305.2 of this 
chapter, the waiver or change in rate of assessment.

    Dated: April 27, 1999.
Kenneth M. Becker,
Executive Director.
[FR Doc. 99-10967 Filed 4-30-99; 8:45 am]
BILLING CODE 1650-01-P